The discontinued fuel vehicle is far from being a "strong man with a broken arm" for BYD, and the actual impact on the market is not large.
Author: Liang Zhihao
On the first day of the Qingming holiday, BYD released a "king fried" for us - it announced through official channels that BYD will stop the production of fuel vehicles from March 2022. In the future, BYD will focus on pure electric and plug-in hybrid vehicles in the automotive sector.
In the early days, BYD was unusual, and did not rush to release the March sales report on April 1 like other new energy vehicle manufacturers, and what people did not expect was that BYD was accumulating a wave of "big moves".
"Fuel vehicles" have become BYD's chicken ribs
But don't get me wrong, as many other manufacturers define "fuel vehicles", BYD's suspension of production only refers to those traditional energy models that only carry internal combustion engines. For BYD, traditional fuel vehicles have long become a "chicken rib" in the automotive business sector.
Before the announcement of the suspension of production, BYD's pure fuel models were actually very few. In addition to the song PLUS, Song PRO, two popular SUVs that still provide 1.5T + 7-speed dual-clutch power, only the BYD F3, a low-end sedan, is still "playing the residual heat".
Yes, you read it right, this 17-year-old car, which was famous in the Chinese car market for its "pixel-level" copycat Toyota Corolla (both of which can even be used with doors), is not only still on sale, but even launched a facelift at the end of 2020, while the current price of BYD F3 is only 44,900 yuan.
In addition, models such as BYD Tang 2.0T fuel version or Song MAX's 1.5T fuel version have not been remodeled since last year, and it can be said that IND's plan to stop production and stop selling fuel vehicles has actually been prepared.
The reason why BYD will do this is that there are their "self-confidence" and their "helplessness".
On the one hand, the DM-i technology market, word-of-mouth double harvest, and consumers' increasing acceptance of new energy have given BYD the confidence to fully replace fuel models with hybrid models. On the other hand, for the Chinese new energy giant, traditional fuel vehicles are indeed their weaker link. Contrary to BYD's strength in the new energy battlefield, many of its pure fuel models actually lack competitiveness and attractiveness in the market, and low-end fuel vehicles like F3 are not conducive to the future upward development of the BYD brand.
According to the data released by BYD, in February this year, BYD's fuel vehicle sales were only 2795, so the discontinued fuel vehicles are far from being "strong men and broken arms" for BYD, and the actual impact on the market is not large.
High sales, but not profitable?
Earlier, BYD announced its revenue in 2021, and the company's annual operating income reached 216.142 billion yuan, an increase of 38.02% year-on-year.
However, the net profit of 3.045 billion yuan has experienced a significant decline of 28.08% compared with 2020. After deducting non-recurring gains and losses, the net profit was only 1.255 billion yuan, down as much as 57.53% year-on-year! Revenue is rising steadily, but the net profit is almost "waist cut", and the incremental non-gain has become bydder's most headache at present.
According to statistics, IND sold more than 740,000 new cars in 2021, achieving a sales growth of 73.34% year-on-year, whether in terms of sales, sound volume or technology, BYD has become the king of China's new energy market.
However, according to the official data released, BYD's gross profit margin in the auto-related business in 2021 is actually only 17.39%, down 7.81% year-on-year, a new low in nearly 14 years. The decline in gross profit margin is more due to the increase in the price of raw materials in upstream industries, such as battery materials, chips, steel, etc. What's more, due to the excessive "baggage" on the body, the pricing strategy of many BYD models is relatively aggressive, resulting in a further decline in its profitability.
At the same time, due to the surge in its own sales, its proud "blade battery" can only meet internal needs first, and cannot be sold externally, which has also led to BYD losing a huge revenue point. It is worth noting that the national subsidy policy for new energy vehicles will be basically withdrawn next year, and in the case of losing government subsidies, BYD's profitability is bound to be more severely tested.
Concentrate on "big things"
In addition to profitability, another urgent problem for BYD to solve is production capacity. According to financial media reports, BYD's cumulative undelivered orders have reached a staggering 400,000 vehicles, and this number shows no signs of improvement.
Since last year, the news about BYD's slow delivery and difficult delivery has been continuously reported, such as Song PLUS DM-i, BYD Dolphin and other popular new cars, and the waiting cycle is often as long as 3, 4 months or even half a year, which also makes BYD attract many consumer dissatisfaction. Perhaps the shortage of chips is a major reason for the lack of production capacity, but the inaccurate estimation of the order volume is also the main reason why BYD cannot quickly digest the order.
After the suspension of fuel vehicles, this part of the surplus production capacity and chips can also be better supplied to more popular hybrid and pure electric models, which may not be a bad thing for consumers who have been waiting for cars for a long time. After all, BYD has previously set a sales target of 1.2 million vehicles this year, and if the supply chain performance exceeds expectations, they even said that they can hit the sales of 2 million vehicles, such a huge sales volume is bound to be a severe test for production capacity.
BYD will not be the last
This time without warning, the suspension of fuel vehicles was announced, making BYD the first traditional car company in the world to officially stop production of fuel vehicles. However, although BYD is the first, it will never be the last, in fact, many car companies have officially announced the timetable of "stopping oil" before.
In China, Changan Automobile and BAIC Group announced earlier that they would fully stop selling fuel vehicles in 2025, and BAIC Group has stopped the sales of its own brand fuel vehicles in Beijing in advance in 2020. The chairman of Changan Automobile pointed out to the point that with the rollout of new energy vehicles, 80% of domestic fuel vehicle brands will face a reshuffle in the future, and if they do not transform, they will only have to close and stop production.
At the same time, many overseas brands have also announced their own "transformation" plans. For example, Toyota plans to stop selling fuel vehicles in China, North America and Europe in 2030, and its luxury brand Lexus will also be transformed into a pure electric brand in 2035. Nissan and Honda are scheduled to fully stop selling fuel vehicles in 2025 and 2040, respectively.
Car companies such as Mercedes-Benz, BMW, and Volkswagen are also gradually increasing the electrification rate of their brands, and they have also made it clear that they will gradually stop the sales of fuel vehicles in different markets after 2030.
According to BYD's forecast, if the price of raw materials is stable, the penetration rate of domestic new energy vehicles is expected to rise to more than 35% in 2022, and perhaps from the current point of view, electric vehicles still cannot replace the market position of traditional fuel vehicles, but major car companies have obviously used practical actions to show us the power of "big trend".
(Some image source network)
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SHOULD BYD focus on new energy?
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